Barnett hopes to be Oakajee peace broker

West Australian Premier Colin Barnett believes his government may be able to help thaw the frosty relationship between Japanese and Chinese interests in the $6 billion Oakajee port project.

Japanese trading giant Mitsubishi has decided to "slow down" work on the already-stalled project in the state's mid-west region, after talks with potential joint-venture partners languished.

Oakajee was to export iron ore from the magnetite-rich mid-west but the low-grade product has dramatically fallen out of favour with a slide in iron-ore prices and wavering Chinese demand.

Mr Barnett told parliament a key reason behind Mitsubishi's decision was tension between Japan and China over its territorial dispute in the South China Sea, as well as the Japanese group's profitability slide.

He said he was surprised at the extent of the "total breakdown" between the nations in a political dispute that had huge economic ramifications, with the Chinese boycotting Japanese products.

Mr Barnett has for some time been trying to drum up Chinese investment in the project - even making mercy dashes to China and having weekly contact with its influential National Development and Reform Commission.

But he's now gone a step further, bullishly claiming the project will proceed and setting himself up as a potential peace-broker between the parties.

"One of the difficulties the state government has is that we continue to have good relationships with Japanese interests and Mitsubishi in particular, and good relationships with the Chinese steel mills and central government in Beijing," Mr Barnett told reporters.

"Those relationships stay strong ... but what is happening is the Chinese and Japanese are not talking.

"That is why Mitsubishi has slowed down the project."

Mr Barnett acknowledged in parliament that Mitsubishi's decision was a setback "but I will not give up ... it will happen".

He also suggested the Chinese might buy out Mitsubishi's interest altogether.

"It is a possibility - I get the sense that Mitsubishi wants to concentrate on its (WA) mine," Mr Barnett said.

Opposition Leader Mark McGowan said the turn of events was "very disturbing" for Australia's economy and he was concerned for those who had reportedly lost jobs as a result.

The premier had "sent the wrong message" by interfering in the project, Mr McGowan said.

He said Mr Barnett needed to accept responsibility for his role now that he had become heavily involved, pledging in 2008 a $339 million contribution towards the port's common infrastructure, a figure later matched by the federal government.

Mr Barnett had made the Oakajee project his own and had said he would deliver it, Mr McGowan told reporters.

John Langoulant, the CEO of Oakajee Port and Rail, which manages the project, said Mitsubishi's decision to "slow down" was a response to current economic circumstances and the need for "prudent" spending.

"Our decision to reduce costs is not taken lightly," Mr Langoulant said.

Oakajee, one of Australia's largest infrastructure projects, had been touted as WA's most important development for the next 50 years, opening up a second major iron-ore province behind the Pilbara.